Drax belches carbon and boosts profits

Drax power station, the biggest producer of greenhouse gases in the country, has reduced the amount of biomass fuel it has been burning by 90% since April, despite soaring profits.

Last year the company cut its carbon dioxide output by 450,000 tonnes by burning crops but this strategy has been all but abandoned because, it claims, there are insufficient financial incentives.

The mainly coal-fired plant in north Yorkshire has been buying carbon credits instead. Drax today reported a first-half pre-tax profit rise from £13m to £317m.

Drax, which this month was besieged by 600 protesters who are angry about its environmental record, admits CO2 emissions are likely to rise this year above the 21m tonnes produced in 2005.

Friends of the Earth said the latest revelations showed that the company "does not care a damn" about climate change.

"It's ironic that while governments say we need to take more action to halt things like the melting permafrost in Siberia, Drax is making as much money as it can out of burning fossil fuels," said Mike Childs at FoE.

He said it was clear that the British government had handed out far too many pollution permits and Drax should be using its profits to invest in biomass fuels, buy more efficient boilers and investigate carbon capture and storage.

The company running the plant has boosted its profits because it burns coal bought on long-term cheap contracts while selling its electricity in a soaring wholesale power market.

"We consider ourselves to be in a very volatile market in terms of our commodities," said its chief executive Dorothy Thompson. "But on balance we think it is a strong market and it is not uncommon for it to be soft at this period."

Drax said it was not burning as much biomass fuel because there was insufficient financial incentive to do so.

"In 2006, we've hardly burnt any biomass because the renewables energy certificates price has collapsed," said Nigel Burdett, head of environment at Drax. "We saved 450,000 tonnes [of CO2] last year [by burning biomass], so it will be much less than that this year."

Meanwhile, the recent fall in wholesale power prices has started to put pressure on energy suppliers such as British Gas and nPower, which have raised prices to household customers several times over the past year.

The consumer group energywatch said there should be no delay in lower prices being passed on to customers. "Only in an uncompetitive market would it take nine months for wholesale price falls to be passed on to consumers," said its chief executive Allan Asher.

The price-reporting agency Platts says wholesale electricity prices have fallen by 30% and gas by 25% in the past four months.

Ofgem, the electricity and gas regulator, has said that it usually takes nine months for price rises or cuts to be felt by the customer and British Gas's parent group, Centrica, said no reductions could be guaranteed.

"Wholesale prices have been falling from 80p to 60p per therm but they are still relatively high," said a Centrica spokesman. "Gas prices for the 12 months to September '06 are still 60% up on the same period 12 months earlier."

He pointed out that British Gas lost £143m in the first half of this year but said a "sustained fall in wholesale prices" could be expected to lead to benefits for customers.